Running a pet supply store requires competence at many aspects of business,
including merchandising, marketing, management, sales and
finance. Possibly the most important task retailers face is one
that most encounter only once
every few years: negotiating
with the landlord.

Finding the right space is
key, with the elements of a good
location including high visibility and lots of traffic, which can
be created by being very near a
supermarket, a discount store
or another frequently visited retailer. Local demographics that
match your assortment, such as
high-end dog and cat products
and services in affluent areas, or
puppies or reptiles in blue-collar
areas, also are important. However, getting the best deal available,
whether for new locations or at
your current address, is crucial.

At between 6 and 10 percent
of sales, rent is the third-largest
expense, after merchandise and
labor, and the largest fixed cost on
a pet store’s financial statement.

Adding maintenance and utilities
brings total occupancy costs up
by another two points. The four-point spread shows that the difference between a good real estate
deal and a mediocre one could be
hugely important to the success
or failure of a store. Yet pet store
owners rarely are experts in real
estate negotiations. Even if you
own a group of stores and have
negotiated multiple leases, it can
be advantageous to have an expert
on your side whose specialty is
representing tenants in retail leasing deals, one who has negotiated
thousands of store leases.

ANTICIPATING WHAT THELANDLORD WILL DO

When a good tenant representa-tive talks to a landlord, they knowwhat will be said two or three con-versations down the road. Evenbefore the first call or email, theyplan what they’re going to say thenext time they speak, anticipatinghow the landlord will respond.They know when to push andwhen to give, which only comeswith long experience. Some ofthe most seasoned representa-tives have dealt with landlords allover the country and know theirstrengths and weaknesses.

Most everyone knows the obvious elements of a deal: rent, free
rent periods and tenant improvement money. Only those very
experienced with retail leasing
are aware of additional aspects
that can make for an especially
great deal. These might include
the landlord being responsible for
part or all of the HVAC unit, waiving or limiting a personal guarantee and different ways to allocate
security deposits.

Richard Aries, president ofESR Commercial in WoodlandHills, Calif., a top tenant repre-sentative in the country, tells of adeal in Lexington, Ky., where thesecurity deposit because the own-ers didn’t have any experience.Because ESR had worked withthat landlord before, they knewhe would accept two months of se-curity deposit, with a third monthapplied to the 13th month’s rent.This saving of four month’s rentwas crucial to the owner’s plan tostock his new store.

EVERYTHING IS NEGOTIABLE

In Orem, Utah, ESR negotiatedsix months of free rent and a fullbuild out. The landlord wanteda full personal guarantee for thecomplete term of the lease, witha month’s security deposit to beheld for the duration. They endedup with a partial 18-month guar-antee and two months’ security,with one being applied to the13th month’s rent. Even standard,supposedly non-negotiable partsof every retail lease can be negoti-ated in some situations. Commonarea maintenance (CAM) chargesare unpredictable and often canbe painful down the road. ESRdid a deal in Austin, Texas, withan unusual 5 percent cap on an-nual CAM charge increases.

Hiring a professional to negotiate for you takes the emotion out
on your end, and sometimes the
representative can read the needs
of the person on the other side. In
Tulsa, Okla., the landlord had a
“B” location in an “A” shopping
center. The asking rent was $22
per square foot, which was good
in that area, and the retailer was
eager to secure the space. ESR
could tell that the landlord’s broker was impatient and wanted the
store to liven up the center. The
store owner wanted to jump in
at $22, but ESR advised her twice
to wait. Eventually, the landlord
settled at $8 per square foot with
nine months of free rent and a
$140,000 build out paid for by the
landlord. I would not expect this
type of deal enhancement often,
but, in this case, the professional
read the situation correctly to the
retailer’s advantage.

To obtain this kind of help,
challenge brokers in your area
with the war stories in this article
and see if they can convince you
that they can do as well.

How You Can Save Money on RentHiring a seasoned tenant representativefor lease negotiations can proveadvantageous for your store’s bottom line.